A dispute within the three-member Hawai'i Public Utilities Commission threatens to compound problems at the agency, which is already slow at making decisions because of staff and budget cuts.

A smooth-functioning PUC is important to many businesses — including Hawaiian Electric Co. and Hawaiian Telcom Inc. — which need commission approval before moving forward on major plans.

On Jan. 4, one of the three commissioners, Leslie Kondo, accused fellow commissioners Carlito Caliboso and John Cole of excluding him from the decision-making on a Hawaiian Electric renewable energy case. Kondo said in a filing with the PUC that his exclusion violated commission rules and made the order invalid. He added that HECO could end up refunding money to consumers as a result.

"From every angle, Chairman Caliboso's and Commissioner Cole's action is wrong and indefensible," wrote Kondo.

The complaints from Kondo are unusual. Through much of its history, the PUC's board has operated by consensus as it delivered hundreds of decisions affecting thousands of local consumers each year.

"This is unprecedented," said local attorney and mediator Michael Nauyokas. "If members of a board or administrative agency like that can't talk to each other, then the rate at which they can resolve problems goes down the tube."

The PUC sets rates charged by public utilities, investigates consumer complaints and oversees ownership changes at companies that it regulates.

Over the next several months, the agency will tackle some of the state's largest regulatory issues in years, including the bankruptcy reorganization of Hawaiian Telcom, competition in the interisland shipping industry and Gov. Linda Lingle's clean energy initiative, which attempts to reduce the state's dependence on imported fossil fuels.

Kondo, in his filing, said he complained about the HECO case because "excluding a commissioner from participating in the decision benefits no one — not the HECO Companies, not the HECO Companies' ratepayers, not the state, not the commission — and, in my opinion, is counterproductive to achieving the state's ambitious clean energy goals."

Caliboso, a member of the PUC since 2003, declined comment on Kondo's allegations. Cole did not return calls seeking comment. Kondo declined to comment beyond what was written in his Jan. 4 filing.

The number of cases completed by the PUC has dropped in the past two years.

The three commissioners are appointed to six-year terms by the governor and earn about $90,000 a year. All three current commissioners were appointed by Lingle.

Much of the PUC's funding comes from a half-percent fee that it charges on the gross income earned by public utilities in Hawai'i.

Collections from that and other PUC-related fees came to $17.6 million last year, but state lawmakers allocated just 60 percent of that money to the PUC for its annual budget.

CLEAN ENERGY GOAL

The boardroom dispute comes as the PUC has put a high priority on Lingle's clean energy agenda, which aims to cut the state's dependence on imported fossil fuels by 70 percent by 2030 and calls for the construction of a $1 billion undersea cable connecting O'ahu to Neighbor Island wind farms.

The PUC currently is handling 34 separate cases involving the clean energy initiative.

The agency is not expected to complete its review of Hawaiian Telcom Inc.'s $460 million, stand-alone reorganization plan for another six to nine months.

The PUC also will not hold hearings on Pasha Hawaii Lines LLC's April 2009 application to challenge Young Brothers Ltd.'s decades-old monopoly in the interisland shipping business because of budgetary and time constraints.

Also pending are the PUC's investigation into the cause of the Dec. 26, 2008, blackout that cut off electricity to nearly 300,000 customers on O'ahu and the agency's 2006 inquiry into service and billing problems at Hawaiian Telcom.

"There are so many critical, massive issues that are being decided that everybody is having trouble keeping up," said Henry Curtis, longtime PUC watcher and executive director of the Life of the Land environmental group.

Caliboso acknowledged the agency has a backlog of cases but said the commission has not put any of the other large issues such as telecommunications on a back burner. He noted that the Hawaiian Telcom case is a high priority for the commission.

Caliboso attributed some of the backlog to staffing cuts last year.

Last session, state lawmakers cut the PUC's 2009-10 annual budget by about 10 percent to $9.6 million, prompting the agency to eliminate 11 of its 49 positions.

The case that Kondo complained about, which was filed in December 2007, will allow HECO to recoup millions of dollars in costs for investing in smart meters, storage batteries and transmission lines that connect its grid to outside renewable energy providers such as wind farms.

Substantive filings in the case were completed in July and commissioners Caliboso and Cole issued a final decision on Dec. 30 that allows HECO to be reimbursed for its renewable energy infrastructure costs.

Kondo wrote that he still had questions about the case at the time his fellow commissioners issued the order.

He said the PUC's actions sends the wrong message to HECO's bond rating agencies who "may question the stability and integrity of the regulatory environment."

"I have unresolved questions about the Renewable Energy Infrastructure Program and for that reason I am not prepared to agree or disagree with the decision and order," Kondo said.

"As a commissioner, I am entitled to make an independent and informed decision as to whether the proposed REIP is reasonable and in the public's interest."

While Kondo wanted more time to study the case, the PUC is under a lot of pressure to move cases.

BACKLOG OF CASES

According to the PUC's own computerized index of cases, there are 329 pending items on its docket involving consumer complaints, rate increase requests and other utility matters.

About a third of those cases are more than a year old and several cases date back to the mid-1990s.

The backlog will only get bigger if the state budget conditions worsen and the state worker furloughs continue.

"Right now ... the agencies are so strapped for budget and staff positions that they can't keep up with the workload that's necessary for the timely processing of these matters," said Carl Freedman, member of the steering committee for the Hawai'i Energy Policy Forum.

Freedman, whose organization includes state officials, environmentalists and representatives of oil companies, said local consumers will end up paying higher rates because of the budget cuts at the PUC.

"People don't realize how much influence the PUC has on the bottom line on every person in the state," said Freedman. "They are the watchdogs over billions of dollars in consumer funds."